There are a variety of ways students can fund their post-secondary education. Using savings, education plans started by their parents, scholarships, and grants are all viable options. Then there's the student loan. Roughly 44 million people rely on this type of financial aid. According to a report by Forbes in February 2019, student loan debt has climbed to nearly $1.5 trillion across the United States. The amount of debt the average student graduated with from the class of 2017 was almost $29,000. And as college tuition continues to rise, student loans will continue to be a popular way to fund education.
Students and their parents can apply for loans directly through the Free Application for Federal Student Aid (FAFSA), one of the offices of the U.S. Department of Education. Other options include going through banks, or private companies like Sallie Mae, which is the number one provider of financial aid and student loans in the United States.
Learn more about Sallie Mae, who qualifies for its student loan programs, and how the company disburses funds to borrowers.
- Sallie Mae is a public company that issues private student loans.
- It offers four student loan programs for undergraduates, graduate students, those pursuing career training, and for parents applying for their children.
- Schools use loan proceeds to pay for tuition and other fees, disbursing any left over money to the student.
- In some cases, Sallie Mae disburses the full loan amount directly to the student.
History of Sallie Mae
Originally a government-sponsored enterprise (GSE) when it was founded in 1972, Sallie Mae only serviced federal student loans. The company began to privatize in 1997, completing the process in 2004. In 2014, Sallie Mae split into two different companies. The first one way Navient, which continued to service federal student loans. The other arm retained the Sallie Mae name, dealing primarily in private student loans.
To date, Sallie Mae is the largest originator of federally-insured loans. The company reportedly held $26.64 billion in assets as of 2018. The value of net student loans granted by Sallie Mae during the same period was $21.14 billion.
Sallie Mae loans provide funding for different educational pursuits. Its undergraduate student loans are for bachelor’s and associate’s degrees, or for certificates at a degree-granting school. Students attending medical and dental schools, or who are pursuing other health professions, an MBA, a law degree, and master’s or doctorate degrees may apply for the graduate student loan program. Anyone seeking professional training or certification at non-degree-granting schools—like trade and culinary schools—qualify for the career training program. Finally, the parent loan allows cosigning parents to apply for students enrolling in degree-granting programs.
Applicants must be at least the age of majority where they apply. Loans are granted to applicants with good credit, while some students may require a co-signer, usually their parents to qualify funding. In these cases, the parents are considered co-borrowers, and may be liable for repayments if the student fails to make payments when the loan comes due.
There are no pre-approvals with Sallie Mae loans, which means all applicants are subject to a credit check.
The minimum amount to borrow is $1,000, with a maximum of the school certified cost of attendance. Sallie Mae doesn't charge application or origination fees. There are also no disbursement or prepayment fees attached to any of the loans, though late payments and returned checks do incur fees.
Funds to the School
Once the loan is approved, Sallie Mae sends a certification request to the student's school, which can take up to 30 days. After certification is received, Sallie Mae disburses the loan. Most educational institutions use the funds received to pay for tuition or other costs that build up over the loan approval waiting period. Schools normally have 14 days to apply the money to a student's account. At certain times, loans may be divided into multiple disbursements—usually one per semester.
Whatever funds are left over are treated as a refund. The school can disburse those funds directly to the student, who may use them for other school-related expenses. Alternatively, the student may choose to put toward the balance of the loan with Sallie Mae.
Disbursements to Students
There are certain instances—although rare—where colleges have Sallie Mae disburse funds directly to the student. If a school allows for direct disbursement, it can issue a check, send the funds as an electronic transfer, pay out the loan amount in cash, or sign over the check directly to the student. Under these circumstances, both the student and the school are listed as the co-beneficiaries, meaning both a school official and the student need to sign to have the funds released directly.